Closing Books on States' ARRA Aid Proves Tricky

Closing out the books on the $800 billion-plus economic-stimulus package from 2009 is proving to be a messy—and even politically dicey—endeavor.

As the Sept. 30 deadline passed for states and districts to spend the majority of their education stimulus funds, more than $2 billion was still left, at least on paper, according to the latest U.S. Department of Education spending report updated through the end of last month.

But just how much actually was unspent, versus just unclaimed, remained unclear, since states technically have until Jan. 3 to deplete their balances in three major funds from the American Recovery and Reinvestment Act. Those funds are the $48.6 billion State Fiscal Stabilization Fund, the $10 billion in additional Title I aid, and the $11.3 billion in additional special education funds. (Some smaller pieces of these funds, such as Race to the Top or School Improvement Grants, have longer spending timelines.) If any 2009 economic-stimulus money isn’t spent, it reverts back to the U.S. Treasury.

And as states sit on millions of dollars in unused Title I money for disadvantaged students, the U.S. Department of Education quietly invited them—nine days before the Sept. 30 spending deadline—to apply for waivers giving an extra year to spend that money. As of Sept. 30, $718 million of the $10 billion in Title I stimulus money was left, according to the department’s data.

The department is using its waiver authority under the “Tydings Amendment,” a section of general federal education law which allows it to give states and districts an extra year to spend federal education money if needed. The waivers would only apply to Title I funds, and not special education or stabilization funds. As of last week, at least nine states had indicated they want that extra time: Arizona, Hawaii, Kansas, Maryland, Michigan, New York, North Carolina, Virginia, and Vermont.

“I am acutely aware of the enormous need to provide continued support for meaningful education reform across the nation and the need to offer flexibility to [states and districts] to give them further time to make spending decisions wisely,” Acting Assistant Secretary for Elementary and Secondary Education Michael Yudin wrote in a Sept. 21 letter to states offering them more time. “For example, it would be unfortunate if grant recipients or subrecipients terminate employees or postpone hiring when there are [fiscal year] 2009 funds that could be used to keep personnel employed.”

Jobs Bill Debate

The move comes as the Obama administration is struggling to win congressional approval for a new $447 billion jobs package, which includes $30 billion the administration argues would prevent an estimated 400,000 teacher layoffs. It’s been a tough sell: Last week, the Senate shelved the plan.

And it could be an even tougher sell if millions of dollars from the original stimulus package appear to remain on the books.

The ARRA included some $100 billion in education aid for states and districts to help them prop up their budgets, and stave off teacher layoffs, as the country weathered a particularly nasty recession. That education aid also included more money for grants for education technology, data systems, and the Teacher Incentive Fund, all of which have different spending deadlines. The Education Department worked to get the money out to states quickly, though warning them that it was a one-time cash infusion that needed to be spent wisely.

And now, as states scramble to meet spending deadlines, some have bigger balances in the three main stimulus funds than others.

While large states such as New York and Texas have a lot of money left to cash out—with $283 million and $210 million, respectively—a few small states were also carrying big balances as of Sept. 30. Indiana had the seventh-largest balance, at $72 million, and Arkansas, the eighth-largest, at $69.6 million. South Dakota, by contrast, had about $12,700 left, and Iowa, $25,000.

Sept. 30 was the deadline by which states needed to have “obligated” their money. That means that states needed either to have spent the money or entered into a contract to spend the money. States have until Jan. 3, 2012, to “liquidate” their money, or, essentially, send in their receipts for reimbursement. If states need more time to liquidate, they can request an extension until March 30 from the Education Department. Lastly, the Title I waiver is available.

Liz Utrup, an Education Department spokeswoman, said the department offered the Title I waivers in response to requests for flexibility from a few states. She said that, relatively speaking, there appears to be little money truly left over, as a majority of it has likely already been spent on contracts and jobs—with just the paperwork left to be completed before the expenses can be reimbursed.

Final Accounting

States seem to agree.

In Texas, which is showing $210 million in unused stimulus money that was supposed to be spent by Sept. 30, the final number will be far lower, predicted Debbie Ratcliffe, a spokeswoman for the Texas Education Agency.

“Some of our largest districts spend funds and then ask for reimbursement only once a year. So we are confident that money has been encumbered but just not drawn down yet,” she said, adding that state officials haven’t decided whether to apply for the Title I waiver for extra time. “Other districts have indicated that although they have a little money left, it is not enough to do something meaningful in their district.”

Vol. 31, Issue 08, Pages 17, 19

Published in Print: October 19, 2011, as Closing Books on ARRA Spending Proves Tricky for States

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